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Gain on real estate transfer not disregarded, despite taxpayer stipulation that transaction was a sham

Today the Tax Court decided CNT Investors, LLC v. Commissioner, a case involving shareholders in an S corporation who engaged in a “Son-of-BOSS” transaction in an attempt to create outside basis in a purported partnership to which the S corporation contributed appreciated real estate property. The Tax Court held, among other things, that the shareholders’ stipulation that the partnership and transaction were shams did not compel the court to disregard the real estate’s transfer or the gain it generated, because the transfer was the object and end result, not a mere component, of the subject series of transactions.